Investors have grown apprehensive of brick-and-mortar retail over the years as consumers continue to ramp up internet shopping. A focus on experiential retail, relying on social engagement, was an ingenious counter-strategy—until COVID-19 hit.
Since the start of the pandemic, retail businesses have scrambled to find ways to engage with customers unwilling or unable to come into a storefront. And those are the winners right now, as many other retailers have had to shut their doors for good.
It’s in the midst of this tumultuous landscape that industry veterans Christopher Nolte and David Schreiber have launched AneVista Group—a private equity platform that plans to develop and redevelop small-format, e-commerce-resistant retail real estate. Tremendous disruption has come to the real estate sector in the past, creating uncertainty. That uncertainty generally leads investors to examine their risk profile, but it also generates new opportunities—a strategy that Chicago-based AneVista is banking on.
“Not all retail is created equally and not all retailers are experiencing the same level of distress. This is a perfect time, in our opinion, to launch a company like this,” said Schreiber, co-founder and managing partner of AneVista. “We believe there’s a very attractive combination of market fundamentals and investment attributes that include increased product availability, distressed pricing and limited investor depth. And we’re using those dynamics to leverage access to a very specific retail segment that we believe mitigates some of those risks that cause investors to pull out.”
Strategy
The overarching approach for AneVista is to develop and redevelop retail assets, though they are more focused on the former. By partnering with national brands to pre-lease ground-up projects, they hope to attract other retailers to their properties.
“Our expectation is that we’ll mitigate a lot of development risks because we’re building occupied centers with national brands and uses that are more relevant for today’s environment,” Schreiber said. “And by today’s environment I really don’t mean COVID as much as I mean uses that speak to the transforming landscape where consumers are sometimes buying at home and sometimes buying on site.”
The disruption that COVID-19 has leveled across retail real estate means that AneVista should be able to source high-quality, well-located properties at attractive pricing. In addition, their revenue model is based more on long-term rent collection rather than asset dispositions.
Institutional investors were pulling back from the retail sector prior to the pandemic and that trend has only accelerated this year. For this reason, AneVista is backed by family offices and high-net-worth individuals, believing that these investors are both nimbler and have the patience to see out a longer-term strategy. AneVista plans to scale up a large operating platform over time, continuing to raise capital, including recapitalization funding. Once their model proves successful, Schreiber expects institutional investors to return to retail.
“You can look at a variety of niche property types—whether it’s medical office, self-storage, cold storage, single-family home rentals—and usually there’s some few pioneering groups that validate a strategy and established credibility,” Schreiber said. “And then you start to see a capital migration to the sectors and eventually the institutional capital will come back.”
Last mile
Schreiber and Nolte have co-opted a buzz phrase from the industrial sector, saying that AneVista will focus on “last mile” retail. The firm is using this phrase both literally and figuratively to guide their strategy.
In a literal sense, AneVista is betting on neighborhood assets tenanted with durable retailers. By selecting locations that are within one to two miles from people’s homes they hope to introduce the most durable, service-oriented and e-commerce-resistant tenants as close as possible to the end consumer.
In the industrial sphere, “last mile” is all about supply chains and fulfillment. That informs, in a more figurative sense, the approach that AneVista hopes to take when selecting their retail tenants, especially regarding behavior modification, compelling consumers to fulfill sales on site versus in their homes.
As an example, Whole Foods, which is owned by Amazon, recently launched a program that provides free one-hour pickup on orders over $35 for Prime members. The supply chain friction of delivering to consumer’s homes proved expensive enough that Whole Foods is rewarding consumers for coming to the store.
According to Schreiber, this is a trend that has popped up among numerous retailers, including restaurants. Not only does it increase foot traffic at their location, but the business can avoid intermediary fees such as GrubHub, Uber Eats or even UPS and FedEx in the case of traditional retailers.
“We hear from our retailer partners all the time that they’re less concerned about last mile fulfillment than they are about making real estate more relevant to their consumers,” Schreiber said.
That, in the end, is the ultimate goal: to make brick-and-mortar retail relevant to the modern consumer.
